Obama Proposes Linking Federal Aid to New College Ranking

By John Hechinger and Roger Runningen -
Aug 22, 2013

President Barack Obama called for
tying federal financial aid to a new U.S. government rating of
college costs and performance, saying spiraling tuition bills
are pricing many U.S. families out of higher education.

The plan would rank similar colleges against their peers,
and students who go to highly rated schools would get more aid
than those lower in the pecking order. The criteria would
include tuition, student debt, graduation rates and earnings of
students once they leave school.

College costs have become “a barrier and a burden for too
many American families,” Obama told students and faculty at the
University of Buffalo today. “Colleges are not going to be able
to just keep on increasing tuition year after year, and then
passing it on to students and families and taxpayers.”

The school was the first stop on a two-day bus trip through
upstate New York and northeastern Pennsylvania that Obama is
also is using to pitch his economic policies before re-engaging
in a fight with congressional Republicans next month over
economic policy and the budget.

“This is all about the upcoming battle that’s going to be
fought between him and Congress over raising the debt limit and
sequester and all the other issues,” said Eddie Mahe, a
Republican consultant based in Albuquerque, New Mexico.

Obama has vowed to rein in the cost of higher education at
a time when more than half of U.S. undergraduates rely on
federal aid and student debt is climbing. Average tuition and
fees at public four-year colleges have more than tripled in the
past three decades, far exceeding gains in family income,
according to the White House.

Rating System

Obama said he’s directed the Education Department to
develop a rating system to be in place before the 2015 school
year. He said he’ll ask Congress for legislation that would dole
out financial aid based on those ratings by 2018.

The federal government provides more than $150 billion a
year in federal student aid, awarding it based on the number of
students who enroll, rather than the number who earn degrees or
what they learn, the White House said.

Obama has already called for giving more federal financial
aid to colleges with moderate tuition increases and strong
educational outcomes -- such as high graduation rates -- and
yanking funding from those with the highest cost. That plan
focused on expanding Perkins loans, a program for low-income
families, and using the money as a lever to hold down costs.

Cost, Outcomes

The White House said the new ratings would be based on such
measures as access, including the percentage of students
receiving Pell grants, reserved for those from lower-income
families; affordability, including average tuition, scholarships
and loan debt; and outcomes, such as graduation and transfer
rates, earnings of graduates and graduates’ advanced degrees.

The federal government already gathers reams of information
to develop such a ranking, and the administration has produced a
College Scorecard with data on cost and student debt.

Colleges have objected to proposals to tie aid to cost and
educational outcomes because of concern that certain
institutions -- and their students -- would be unfairly
penalized.

The government will have no trouble producing a ranking
with the data it has available, said Terry Hartle, senior vice
president at the Washington-based American Council on Education,
which represents 1,800 college presidents.

“But it will be contentious” to figure out how to use it
to provide aid to students, Hartle said.

Political Differences

Reaction among lawmakers split along party lines,
suggesting the political difficulty of getting legislation
through Congress to tie aid to rankings. Iowa Democrat Tom Harkin, who heads the U.S. Senate education committee, said he
supported college ratings “to help students and their families
make informed decisions.” He didn’t say whether he would back
tying aid to such rankings.

Minnesota Republican John Kline, who is chairman of the
U.S. House Education & the Workforce Committee, voiced concern
“that imposing an arbitrary college-ranking system could
curtail the very innovation we hope to encourage -- and even
lead to federal price controls.”

The administration already tried to crack down on for-profit colleges by cutting off aid from those whose students
take on heavy debts that don’t pay off with higher incomes. The
industry lobbied heavily against the plan and successfully
fought against the rules in court, saying they were arbitrary
and would hurt low-income students. Part of their argument was
that the rules targeted for-profit colleges and should apply
more broadly, as the new plan would.

Enhancing Prospects

As borrowers buckle under more than $1 trillion in student
loans, Obama has repeatedly emphasized that higher education is
the pathway to future prosperity for middle- and lower-income
Americans.

In addition to linking funding to cost increases and
outcomes, Obama has previously pushed for colleges to offer
standard financial-aid award letters, so students can easily
compare offers. A number of colleges, including the State
University of New York system, have voluntarily signed on to
that effort.

In its new proposal, the administration reiterated a call
for $1 billion “Race to the Top” college grants, modeled after
an elementary and high school program that pushed states to
agree to the White House’s education agenda. Under the college
version, states that promote affordability could win money.

Accountability

Obama would also give a financial incentive to enroll
students eligible for Pell Grants. To prevent waste, the money
would require colleges with high dropout rates to dole out aid
over the course of the semester, rather than a lump sum.

The president would also encourage colleges to award credit
based on what is learned, rather than time in classes. He cited
such low-cost online programs at Western Governors University,
Southern New Hampshire University and the University of
Wisconsin system. Massive Open Online Courses, or MOOCs, offered
by Harvard, Stanford and the Massachusetts Institute of
Technology, could play a key role, the White House said.

On the matter of student debt, Obama proposes to make all
students eligible for plans that let them repay loans based on
how much they earn -- capped at 10 percent of monthly income.
Currently, about 2 million of 37 million student-loan borrowers
are benefiting from such income repayment plans.

Student Debt

Under the president’s plan, the Education Department will
start a campaign this fall of calling borrowers who have fallen
behind on their payments and encouraging them to sign up for
affordable repayment options. Next year, the government would
help them do so when they file their taxes.

The University of Buffalo and Binghamton University, where
Obama speaks tomorrow, are part of the New York university
system. Under Chancellor Nancy Zimpher, State University of New
York was among the first to sign onto the administration’s
“Know Before You Owe” financial-aid initiative.

The SUNY system has among the highest graduation rates and
lowest costs in the country, said spokesman David Doyle. For the
2013-14 school year, the in-state cost of attendance, including
room and board, is $22,700. The system is also developing an
online initiative to grant online bachelor’s degrees in three
years and master’s in four, he said.

“We deliver affordable, high-quality education,”
Binghamton University President Harvey Stenger said in a phone
interview. “We’re doing the things the president wants to talk
about.”